May 5, 2015

More Export Control Reform on the Horizon: BIS and DDTC Publish Proposed Rules to Revise Category XII

by Gwen Green

School ReformOn May 5, 2015, the U.S. Department of State, Directorate of Defense Trade Controls (“DDTC”) and the U.S. Department of Commerce, Bureau of Industry and Security (“BIS”) concurrently published proposed rules to transfer certain less-sensitive items from Category XII of the U.S. Munitions List (“USML”), which currently controls fire control, range finder, optical and guidance and control equipment, to the Export Administration Regulations (“EAR”) Commerce Control List (“CCL”). The proposed rules are intended to create a “bright line” regarding control of these items between the USML and CCL.

The revised Category XII, with a few exceptions for “specially designed” parts, components, accessories, and attachments, would describe in more precise detail the specific parts, components, accessories, and attachments that still warrant control on the USML. Items formerly controlled under Category XII would largely be transferred to new and pre-existing “600 Series”  Export Control Classification Numbers (“ECCNs”) on the CCL.  New ECCNs 6A615, 6B615 and 6D615 would control military fire control, ranger finder, and optical equipment, and revised ECCN 7A611 and new ECCNs 7B611, 7D611 and 7E611 would include military optical and guidance equipment.  The proposed rules would revise several existing ECCNs outside of the 600 Series, including 0A987, 2A984, and several 6Axxx and 7Axxx ECCNs, to add notes to the Related Controls paragraph or Items subparagraphs to reference corresponding Category XII control(s).

To counterbalance the transfer of certain items from the USML to the CCL, the proposed rule would modify the availability of certain EAR license exceptions, expand license requirements on multiple items, and restrict the export and reexport of certain items to traditional major allies of the United States, including Canada.

The proposed rules are only a small part of the ongoing Export Control Reform (“ECR”) initiative to improve national security and streamline the U.S. export control system.  If implemented, companies will have to determine the correct jurisdiction and classification of their items and evaluate existing licenses to determine whether new authorizations are required. Companies would also need to make necessary changes to their compliance program and train employees on the changes.  Potentially affected manufacturers, exporters and brokers should consider providing relevant comments to the DDTC and BIS prior to the July 6, 2015 deadline.